Oversea-Chinese Banking Corp Ltd v Infocommcentre Pte Ltd

• Jurisdiction: Singapore
• Judge: V K Rajah J
• Judgment Date: 29 July 2005
• Neutral Citation: [2005] SGHC 134
• Date: 29 July 2005
• Subject Matter: Whether facility recallable on demand,Whether facility granted for fixed term or particular purpose,Whether such misrepresentation inducing defendant to enter into compromise arrangements with plaintiff,Consideration,Whether fresh consideration furnished,Whether variation of terms effected by compromise arrangements contractually ineffective,Contract,Overdraft facility granted for purpose of supplementing defendant's working capital,Lending and security,Whether plaintiff's failure to disclose document in its possession amounting to act of misrepresentation,Forbearance,Misrepresentation,Inducement,Overdrafts,Banking
• Docket Number: Originating Summons No 456 of 2004 (Registrar's Appeal No 179 of 2004)
• Published date: 01 August 2005
• Defendant Counsel: Michael Hwang SC and Ernest Wee (Michael Hwang) and Oommen Mathew (Haq and Selvam)
• Court: High Court (Singapore)
• Plaintiff Counsel: Hri Kumar and Wilson Wong (Drew and Napier LLC)

29 July 2005

V K Rajah J:

Background

1 The defendant is an investment company, its sole asset being a substantial piece of vacant land at Lot 1669 of Mukim 20, Tagore Drive/Tagore Avenue (“the Property”). Around 1995 the defendant entered into an agreement with Bank of Singapore (“BOS”) for the provision of banking facilities. Pursuant to a letter of offer dated 18 July 1995, BOS granted the defendant a US$17,000,000 short term advance facility (“the LOF”). The LOF stated specifically that the purpose of the facility was to “supplement the working capital requirements” of the defendant. Clause 17 of the LOF further provided that “the facility is subject to our periodic reviews and the Bank reserves the right to continue with the facility herein offered”.

2 Clause 3 of a short term advance facility agreement dated 31 October 1995 (“the STAFA”) between the parties also stipulated that:

The Facility shall be used to supplement the Mortgagor’s working capital and/or such other purpose(s) as may be approved by the Bank

Clause 8 of the STAFA reiterated that BOS was entitled to terminate and cancel the facility as it thought fit.

3 The facility was secured by a mortgage dated 31 October 1995 (“the Mortgage”) together with a guarantee for the sum of US$17m furnished by Dr Ang Thian Soo (“Dr Ang”), a director of the defendant, who is in effect its alter ego. The Mortgage secured the defendant’s entire registered estate or interest in respect of the Property in favour of BOS. Upon the defendant’s acceptance of the facility, it drew promptly on the facilities and applied the moneys to its own use.

4 In 1998, the STAFA was restructured and converted into a Singapore dollar denominated overdraft facility.

5 By way of a further letter of offer dated 13 February 1998 (“the FLOF”), BOS offered the defendant a Singapore dollar overdraft facility to be utilised in order to repay the then existing US dollar facility. The FLOF which was concisely captioned “Restructuring of Facility” sought quite simply “to fully repay the existing US$ Short Term Loan”. There was no express offer of additional or fresh funds to the defendant. In line with the earlier LOF, cl 15 of the FLOF provided that the facility granted to the defendant was “repayable on demand”.

6 The defendant agreed to the implementation of the restructured facilities. There was no alteration to the security arrangements save that Dr Ang was to execute a fresh guarantee in the Singapore dollar equivalent based on the prevailing exchange rate at the point of conversion.

The release letter

7 The defendant now alleges, inter alia that BOS had also agreed to release to the defendant and/or its contractor, upon the completion of a commercial warehouse project (“the Proposed Project”) on the Property, 40,000 sq ft of saleable area (“SA”) equally distributed on all floors and free from any encumbrance. The defendant contends that BOS subsequently reneged on this important agreement. I pause at this juncture to set out briefly the pertinent factual context.

8 It is incontrovertible that by early 1998 the defendant had defaulted on its contractual obligations to BOS. The value of the Property as it then stood, and indeed even more so as it stands now, was insufficient to repay the outstandings. The defendant claims that it intended to repay BOS by developing the Property and thereafter employing the sale proceeds in discharge of its debt. As it did not have sufficient funds to pay for the development, it proposed paying the main contractor by releasing the 40,000 sq ft of SA of the completed warehouse to the contractor as payment in kind. The defendant claims that BOS agreed to this arrangement.

9 The defendant also adds that BOS’s agreement allegedly to release the SA “equally located at all floors to the Contractor for arranging construction finance” was documented in a “Supplemental Letter of Offer” to the defendant issued in 1998. BOS was acquired by the plaintiff sometime in 2000. When the plaintiff asked the defendant to produce that letter, the defendant claimed that it had misplaced its copy and asked in turn that the plaintiff let it have its file copy. It is pertinent to note that at this point of time the bank officers who were liaising with Dr Ang were not the same officers who had earlier dealt with him. The bank officers, after having combed through the files, claimed they could not find the letter in question and informed Dr Ang that they could not substantiate his claim.

10 The plaintiff, however, subsequently managed to locate the letter dated 18 February 1998 (“the Release Letter”) and has produced it in these proceedings. In the Release Letter, BOS had informed the defendant that it was agreeable to release 40,000 sq ft of SA free from encumbrance to the contractor. The defendant now claims that this letter is nothing short of a “Supplemental Letter of Offer”. For the ease of reference the Release Letter is reproduced in full:

We refer to the above and your proposed development of a 4-storey showroom/warehouse/office complex thereon with M/S RAP International Consultants and its Associates.

We are pleased to inform you that the Bank is agreeable to allow partial discharge of 40,000 square feet of warehouse or office space, free of payment, upon the proposed complex development receiving Temporary Occupation Permit from the authorities.

Furthermore the bank is agreeable to allow partial discharge of the remaining warehouse or office space room upon receipt of not less than $510 per square feet or 85% of the sales proceeds, whichever is higher.

[emphasis added]

It is important to note that the Release Letter itself did not specify where the 40,000 sq ft of SA was to be located.

11 The plaintiff, on the other hand, contends that even if there was such an agreement in February 1998 for the 40,000 sq ft to be “equally located on all floors” it is wholly irrelevant as the parties subsequently arrived at an express written agreement on the exact location of the SA to be released to the contractor in connection with any proposed development of the property.

12 The plaintiff granted the defendant several extensions of time and considerable indulgence since 1998 but despite this no progress has been made in relation to the development of the Property. Despite the full drawdown on the facilities the development of the Property never commenced.

The recall of the facility

13 The plaintiff eventually reached the end of its tether. By way of a letter dated 16 April 2002, the facilities granted to the defendant pursuant to the LOF and FLOF were terminated. The plaintiff demanded that the defendant effect full repayment of all the outstanding sums failing which it would take appropriate steps to protect its interests. The defendant did not at this juncture dispute its liability to pay. Instead, the defendant entered into discussions and negotiations with the plaintiff with a view to obtaining the plaintiff’s further indulgence.

14 After lengthy and extensive negotiations with the defendant, the plaintiff reinstated the overdraft facility on the basis that the defendant comply with various terms and conditions. The defendant unequivocally accepted the additional terms and conditions. This compromise agreement is evidenced by the defendant’s acceptance of the plaintiff’s letters dated 20 September 2002 and 2 October 2002 (collectively “the first compromise agreement”). Consistent with the existing facility, the plaintiff was once again expressly conferred the discretion to review and/or terminate the facility as it saw fit.

15 Despite the further indulgence granted to the defendant pursuant to the terms of the first compromise agreement, the defendant failed to comply with its obligations. The defendant then entered into further discussions and negotiations with the plaintiff and exhorted the plaintiff to withhold remedial action.

16 The plaintiff once more acceded to the defendant’s request and revised the facility terms yet again. Pursuant to a letter dated 29 November 2002 (“the second compromise agreement”) the plaintiff agreed to continue granting the defendant the use of the credit facility on fresh terms. The second compromise agreement stipulated that the existing security arrangements were to remain and Dr Ang’s express consent qua guarantor to this compromise was also sought. Clause 17 of that letter stipulated:

Notwithstanding anything herein to the contrary, expressed or implied, the Facility hereby agreed to be made available by the Bank, shall at the absolute discretion of the bank, be reviewed from time to time and at any time, or be revised, reduced or cancelled accordingly.

The plaintiff’s letter of 16 April 2002 recalling the facility was expressly revoked and the first compromise agreement deemed superseded by the second.

17 On 5 December 2002, the defendant and Dr Ang accepted the terms of the second compromise agreement without qualification. The plaintiff had hoped that with such carefully negotiated detailed terms for the Proposed Project the defendant would honour its commitments. This, however, was not to be.

18 The defendant again, and it would not be unkind to say, quite predictably, failed thereafter to fulfil its fresh obligations. The plaintiff, after terminating the facility by way of a letter dated 27 March 2003, then agreed to revise some of the terms and conditions. The plaintiff subsequently issued supplemental letters of offer dated 7 August 2003 and 15 October 2003 (collectively “the third compromise agreement”) to vary some of the terms of the letter of offer dated 29 November 2002. These letters were again accepted by the defendant.

19 Pursuant to the varied terms, the parties agreed, inter alia, to the following:

(a) The defendant would procure its contractor, Union Corporation (China) Pte Ltd (“Union”) to furnish a performance bond of not less than S$1.3m to be assigned to the plaintiff.

(b) The sale price for each floor...